Question
Dougs Custom Construction Company is considering three new projects, each requiring an equipment investment of $26,400. Each project will last for 3 years and produce
Dougs Custom Construction Company is considering three new projects, each requiring an equipment investment of $26,400. Each project will last for 3 years and produce the following net annual cash flows.
Year | AA | BB | CC | ||||
---|---|---|---|---|---|---|---|
1 | $8,400 | $12,000 | $15,600 | ||||
2 | 10,800 | 12,000 | 14,400 | ||||
3 | 14,400 | 12,000 | 13,200 | ||||
Total | $33,600 | $36,000 | $43,200 |
The equipments salvage value is zero, and Doug uses straight-line depreciation. Doug will not accept any project with a cash payback period over 2 years. Dougs required rate of return is 12%. Click here to view PV table. (a) Compute each projects payback period. (Round answers to 2 decimal places, e.g. 15.25.)
AA | enter the payback period in years rounded to 2 decimal places | years | |
---|---|---|---|
BB | enter the payback period in years rounded to 2 decimal places | years | |
CC | enter the payback period in years rounded to 2 decimal places | years |
Which is the most desirable project?
The most desirable project based on payback period is |
Which is the least desirable project?
The least desirable project based on payback period is |
(b) Compute the net present value of each project. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round final answers to the nearest whole dollar, e.g. 5,275. For calculation purposes, use 5 decimal places as displayed in the factor table provided.)
AA | enter the net present value in dollars rounded to the nearest whole | ||
---|---|---|---|
BB | enter the net present value in dollars rounded to the nearest whole | ||
CC | enter the net present value in dollars rounded to the nearest whole |
Which is the most desirable project based on net present value?
The most desirable project based on net present value is |
Please be as specific as possible, I am so confused on how to find the correct answers, thank you.
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